IPO Pricing and Share Allocation : The Importance of Being Ignorant

Since an underwriter sets an IPO's offer price without knowing its market value, investors can acquire information about its value and avoid overpriced deals ("lemon-doge"). To mitigate this well-known risk, the bank enters into a repeat game with a coalition of investors who do not lemon-dodge in exchange for on-average underpriced shares. We (i) derive and test a quantitative IPO pricing rule (showing that tech IPOs were not excessively underpriced during the boom of the 1990s); and (ii) analyzing a unique multibank data set, find strong support for the conjecture that a bank preferentially allocates shares to its coalition

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Year of publication:	2011
Authors:	Gondat-Larralde, Céline
Other Persons:	James, Kevin R. (contributor)
Publisher:	[2011]: [S.l.] : SSRN
Subject:	Börsengang \| Initial public offering \| Theorie \| Theory \| Anlageverhalten \| Behavioural finance \| Finanzanalyse \| Financial analysis \| Bootstrap-Verfahren \| Bootstrap approach \| Emissionskurs \| Offering price
Description of contents:	Abstract [papers.ssrn.com]